When doing estate planning for clients, one of the first questions I have to ask them is how they are married, says Pieter Willem Moolman.
While most people at least know whether they are married in or out of community of property, very few can remember whether or not the accrual system is applicable or not. This also means that they do not understand the implications this factor could have on their estate planning.
If you are married out of community of property, each spouse has their own estate that they can dispose of as they wish. Even if the accrual system is applicable, spouses can still dispose of their estate during the course of the marriage as they wish, without the consent of their partner.
In the event of death this, however, changes. The surviving spouse’s potential accrual claim has to be considered before bequests can be made to third parties.
The accrual system determines that each spouse can set out a starting value in the antenuptial contract in respect of their assets accumulated up to that stage. If a spouse has no assets, or if their liabilities exceed their assets, this value is nil.
During the course of the marriage, each party can accumulate and dispose of assets in their own right, without the consent of their spouse. When the marriage ends, either as a result of death or divorce, account has to be given of such assets that have been accumulated over time.
The accrual system attempts to assist the spouse who has had fewer opportunities to grow their estate during the course of the marriage. A calculation is done to determine which spouse has had the most growth in the value of their estate, starting from the base point set at the outset.
If the value of assets was determined in the antenuptial contract, it is first adjusted to make provision for inflation. Once this growth in each spouse’s estate has been determined, the difference between the two values must be calculated.
If one spouse’s estate has grown by R1 million and the other spouse’s only by R400 000, the difference in growth is R600 000. The spouse who has had the least growth in their estate is entitled to half of the value of this difference – therefore R300 000 in our example.
Now how could this affect your estate planning?
Whenever the surviving spouse is the sole heir, the potential effect of the accrual system will not present any issues: such spouse receives the whole estate in any event, whether by virtue of their accrual claim or the bequests in terms of the will.
It is only in the event that a third party, including children, stands to inherit any assets that one must be careful. Before any such bequests can be made, the accrual system has to be implemented.
Also where bequests are made to an inter vivos trust, the potential claim of the surviving spouse has to be considered first.
This means that a proper analysis of your estate will be required before advice can be given in respect of the wishes you may want to implement in your will.